Month: September 2022

eBet, a loyalty and tracking systems business for gaming venues, has been sold to Venue Digital Technology Pty Ltd, which is led by former Tabcorp and Tatts Group executive Frank Makryllos, in a deal worth AUS$62m ($41.7m/€41.5m/£36.4m). eBet has about 525 venues on its books and more than 30,000 electronic gaming machines across New South Wales and Victoria.

At the same time, Tabcorp’s Max Regulatory Services (MRS) has been awarded the new exclusive Tasmanian Monitoring Operator Licence, through which it will monitor all Electronic Gaming Machines (EGMs) in hotels and licensed clubs in the state.

Adam Rytenskild, Tabcorp’s managing director and chief executive, said: “The transactions announced today allow us to simplify our Gaming Services business as we pivot to an integrity services model.

“This continues the urgent implementation of Tabcorp’s transformation strategy. We have strong momentum and bold ambitions to grow both our Wagering & Media and Gaming Services businesses.

“The potential sale of eBet was disclosed at the release of our FY22 results and we are pleased to have the agreement swiftly and in line with our new strategic direction.”

Tabcorp outlined the strategies for each segment of its business earlier this year following the planned demerger of its lottery operations from wagering, media and gaming services.

Under the 20-year Tasmania licence, which begins next July, MRS will pay the Tasmanian Government an upfront licence fee of $2m along with an additional $1m grant over the term of the licence to be paid into the Community Support Fund.

Tabcorp said: “The contract reaffirms the opportunity for the business as governments move toward an independent, third-party monitoring model.”

Tabcorp said that eBet generated EBITDA of $4.4m and an EBIT loss of $2m in 2022. The sale is targeted for completion by the end of 1H FY23, subject to necessary probity approvals being obtained and no material adverse change occurring.

Tabcorp would be eligible to receive a break fee of $3m (up to $10m in certain circumstances) where the agreement is terminated due to the buyer failing to obtain the necessary probity approvals or failing to complete the sale.

It said the sale is expected to result in a pre-tax gain on sale of approximately $39m on completion.

The Commission has entered into an “enabling agreement” with the lottery business formerly known as Sazka, meaning that Allwyn has officially been awarded the licence. The transition to a new lottery operator has now begun.

The fourth licence is set to include a number of changes from previous years that will aim to improve the lottery from both a consumer and licensee perspective. The changes include a shake-up of the operator incentive mechanism which the regulator said would be more closely aligned with returns for good causes. It will also include greater operator flexibility, a fixed 10-year licence term and the creation of a retail charter.   

“We are pleased to have officially awarded the fourth licence to Allwyn following a highly successful competition and the court’s decision to lift the suspension on the award process,” said Commission CEO Andrew Rhodes. “We now look forward to working with all parties to ensure a smooth and efficient handover.”

“I am confident that Allwyn and the key changes for the fourth licence will maximise returns to good causes, promote innovation, deliver against our statutory duties, and ultimately protect the unique status of the National Lottery.”

Allwyn’s CEO, David Craven, added that his business was excited to take over the lottery.

“This moment signals a time for change for the National Lottery,” he said. “We have already begun this exciting new chapter; our transformation programme has started with energy and purpose from our Watford based headquarters. We must seize this moment, creating the right conditions for the National Lottery to innovate.”

“Our primary transition objective is to responsibly boost performance leading to increased contributions to good causes. We look forward to welcoming the existing Camelot colleagues in Watford to be part of this new, exciting chapter,” Craven continued.

Disputed licence award

In March, the Commission announced that the European-facing lottery operator was its preferred applicant for the licence, meaning that the Lottery would be run by a new operator for the first time since its founding in 1994.

The announcement faced pushback from both Camelot, the previous operator, and IGT, Camelot’s technology provider. Both companies criticised the decision and eventually challenged it in court.   

Camelot issued a legal challenge to the decision in April, arguing that the GC had not been forthright in its communication and that its employees were “owed a proper explanation” why the GC did not renew its licence. This led to the High Court automatically suspending the licensing decision.

In early September, Camelot withdrew its high court challenge following media reports that money for good causes could be at risk in a lengthy court case – removing Allwyn’s final obstacle in receiving the licence.

The news was initially shared during a company-wide meeting on 15 September.

Following the announcement, TrueLayer CEO and co-founder Francesco Simoneschi shared a letter he had penned to TrueLayer employees.

“As discussed in our all-hands today, we have had difficult news to share with you,” read the letter.

“Following a process of debate and looking in detail at the different courses of action, it is with great regret that we’ve decided to reduce our headcount by 10%.”

He did not reveal which sectors of the business – which operates in a number of payment-related sectors and deals with many industries besides gaming – the layoffs would occur in.

Simoneschi said that the decision was made necessary by challenges presented by new markets, regulation and industry changes.

“As you know, we set ourselves the ambitious goal of changing the way the world pays, and we’ve made great strides over the past twelve months,” he continued. “For these reasons, I completely understand that today’s announcement may appear counterintuitive.”

“We are now operating in a very different context and more challenging market conditions. TrueLayer, while being in a position of strength, is not immune to these broader factors.”

This, said Simoneschi, caused the company to have to evaluate which roles would be of highest value.

“As we’ve followed this process, we’ve carefully considered the roles that are going to be most important for us to succeed and have acted to mitigate the impact of today’s announcement as far as possible by looking at opportunities to consolidate and align between teams, as well as improving operational efficiency,” he said.

TrueLayer will offer each affected employee an exit package, which will consist of salary payments to cover notice periods, three months of pension contributions and mental health support.

In total, £6.4m of the revenue came from content licensing revenue. Social gaming revenue hit £1.8m, while brand licensing contributed £300,000 of the overall revenue.

Revenue from North America alone came to £4.7m. During the quarter, the operator was issued with a licence to operate in Connecticut and was given a supplier licence for Ontario.

In Europe, Gaming Realms launched eight new games through its Slingo brand throughout the half-year and entered the Spanish and Danish markets.

“The group has delivered another period of strong growth supported by our ongoing expansion into newly regulated markets in North America and Europe, with content licensing revenue increasing by 57%,” said Michael Buckley, executive chairman of Gaming Realms.

“We have also continued to expand on our existing partnerships, adding new content through our direct integration agreements, as well as signing new licensing deals and launching a series of new games.”

Operating expenses were £5.1m. Breaking these down, administrative expenses for the quarter were £3.7m, while operating expenses came to £1.1m. Share option and related charges were £162,819, and marketing expenses were £53,274.

After these costs, the earnings before interest, tax, depreciation and amortisation (EBITDA) was £3.3m.

Following amortisation, depreciation, finance expense and finance income, the total pre-tax profit was £1.3m.

Tax credit amounted to £44,719, bringing the total profit for the period to £1.3m – a rise of 63.9% from H1 2021.

“Whilst we are mindful of the impact of higher inflation throughout global markets, the outlook for the group remains positive,” executive chairman Michael Buckley said. “The group has a strong new business pipeline and will also see additional revenues coming from North America, as well as from the new market entries in Europe. As such we expect to deliver on market expectations for the full year.”

The B2B igaming technology provider said its financial performance for the three months to 30 June was ahead of expectations thanks to a strong global sales performance, good cash balance and the successful completion of its biggest-ever acquisition – the purchase of Croatian sports betting software provider Leapbit.

In what was a successful start to 2022, EveryMatrix reached 90% of total 2021 deal value from new clients within the first six months of the current year.

The group secured a record 43 new client wins across all products in Q2 2022, including four new top-tier clients – 888casino and BetMGM in the US, the National Lottery of Malta and a leading operator in Italy. Two key clients in regulated markets, Germany and Romania, went live with CasinoEngine, while 54 new brands went live with SlotMatrix.

The balance sheet saw €30.1m of revenue added, which was up 41% year-on-year compared to Q2 2021. That lift came despite regulatory changes in Germany, one of its major markets, which began to negatively impact EveryMatrix following the implementation of the Fourth Interstate Gambling Treaty from Q3 2022.

Gross profit increased by 17% year-on-year to €14.9m, with a four-year compund annual growth rate of 35%. While the regulatory changes in Germany impacted gross profit in casino, that segment still grew by 11% thanks to the group’s product diversification and broad client base.

Gross profit from the rest of world increased by 36% year-on-year and by 87% between Q2 2020 and Q2 2022.

Gross profit from EveryMatrix’s sports segment for Q2 2022 was up 30% compared with the same period last year. However, heavy promotions from its top client led to a drop in gross profit from the previous quarter.

Gross profit from its platform segment was up slightly on the previous quarter and increased 16% compared to Q2 2021 to €3.8m.

Ebbe Groes, group chief executive of EveryMatrix, said: “Driven by our diverse product offering and strong client base, we saw yet another record number of new client wins in the quarter with 43 deals signed across all products. Furthermore, a 17% increase in gross profit, the best reflection of the underlying performance of the group, allows us to continue to invest in our future growth.”

EveryMatrix completed the acquisition of Leapbit for an undisclosed sum in May 2022, at the time saying the acquisition would strengthen its online-first OddsMatrix sports betting product with an advanced retail offering.

Founded in 2018, Leapbit is a B2B sports betting supplier, employing a core team that was previously with Romanian bookmaker Superbet. EveryMatrix said in May that OddsMatrix will integrate Leapbit’s retail-focused software solution and other products such as virtual horse racing and lottery games.

The finding came from an “insight workshop” hosted by GamCare, which involved representatives from the lending sector, debt support, gambling support services, academics, policy makers, regulators and trade bodies. 

From this, the body said it learned that credit to gamble was all too easy to obtain.

“At present, there remains little to prevent consumers borrowing with overdrafts, loans, cash withdrawals – or riskier lines of credit such as payday loans and transfers from credit cards for gambling,” it said.

GamCare said that there were three main findings from this workshop.

First, it said that “cultural change” was needed within the gambling sector, with enhanced staff training “to better understand how gambling harms can impact their customers”.

Next, GamCare said that a “gambling harm lens” should be applied when credit is offered. This would involve lenders specifically considering the possibility and effects of gambling harm when offering to lend money. GamCare said it hoped that the various stakeholders involved could together come up with “a meaningful set of indicators” of gambling harm.

Finally, GamCare said that the level of “friction” for customers trying to stop gambling should be reduced.

This would include introducing time delays between credit application and approval to money going into a gambling account.

“I know from my personal experiences, and I now see first-hand through our lived experience community, how quickly gambling can escalate when it becomes problematic,” GamCare lived experience manager Colin Walsh said. “The ease of access to multiple lines and forms of credit in our 24/7 world allowed me and many others to gamble with borrowed money in a way which isn’t controlled, responsible or sustainable but also the guilt, remorse and shame felt after gambling episodes. 

“By raising awareness of the signs of harmful gambling with lenders I hope we are able to improve protection for people being harmed by gambling and give some time for reality checks and reflection and rather than regret and misery.”

Meanwhile, John Wightman, ombudsman leader and head of practice for consumer credit with the Financial Ombudsman, said that lenders should already not lend to those showing signs of gambling harm unless there is a good reason to do so.

“Firms should lend responsibly and make sure their actions aren’t putting customers in a worse position,” he said. “We would expect a lender to be able to justify any decision to provide credit to a customer where it knew (or should have known) about a track record of problem gambling. 

If a customer believes they have been treated unfairly by a lender, they should come to the Financial Ombudsman Service for free and we will see if we can help.”

The findings came despite the Great Britain Gambling Commission bringing in a ban on the use of credit cards to gamble in 2020.

Last year, the regulator said that the ban had been “successful” and did not lead to “unintended consequences” such as forcing players to turn to riskier forms of credit to fund their play.

The Philippines National Police (PNP) rescued the 40 foreign nationals from an illegal POGO company in Angeles City. Pagcor said that these workers had been were kidnapped and forced to work for the organisation.

POGOs are operators based in the Philippines that target customers from other countries, typically other Asian countries such as China. The sector has faced a number of scandals in recent years, related to alleged breaches of both Philippine law and the laws of other nations.

DILG secretary Benjamin Abalos stated that the outcome of the operation was due to successful inter-agency collaboration between multiple government entities including the PNP, the Department of Interior and Local Government (DILG), the Department of Justice, Pagcor and the National Bureau of Investigation (NBI), who have been cooperating in the work of stopping POGO-related human trafficking throughout the archipelago country. Following the raid, Pagcor formally ordered the closure of the illegal POGO business.  

Commenting on the operation, Abalos said: “Our police officers are pursuing the other people involved in this and it remains an ongoing case. The person caught was a human resource development officer so we also believe there a more senior individual still at large.”

Abalos also drew a distinction between legal and illegal POGOs.

“We are shutting down this venue as an illegal establishment. But it must be said that we have no problem with legal POGOs. Indeed, have no problem with either their policies or their employees, but the illegal operations give the industry a bad name,” Abalos explained.

The Bureau of Immigration (BI) will be responsible for the rescued workers, and will investigate their documents and working permits.

Pagcor regulated the POGO industry in 2016, and since then it has generated significant government revenue. However, PAGCOR Chairman and CEO Alejandro Tengco has said that even legitimate POGOs may suffer the consequences if issues such as human trafficking are not solved.

“If these kidnapping incidents and other illegal activities persist, it is clear that not only will we cancel the licenses of POGO operators, but the entire industry may be affected by whatever decision will emanate from the national government. So let us help each other solve these issues as soon as possible,” said Tengco.

The DILG has given the PNP a two-week deadline to abate all POGO-related illegal activity in the country.

“The president has said this must be solved because the image of the country and of the administration is being tarnished by these illegal incidents,” Tengco continued.

Along with the POGO enforcement actions, the Philippines is currently undergoing a rethink of its online gambling regime, with Senator Joel Villanueva recently filing a bill in the Philippine senate that would ban all forms of online gambling in the country. In February, a report presented to the senate found a “clear link” between POGO operations and human trafficking activities.

The comments came at an event for investors held yesterday (14 September) in London, in which Kindred outlined its long-term strategy. Ahead of this meeting, the business published its long-term financial targets, forecasting revenue of £1.6bn by 2025.

At the investor event, Tjärnström addressed questions regarding what kind of M&A opportunities Kindred would pursue in the near future. He said that the business was looking for “larger” opportunities, but not “transformational” ones. He added that acquisitions on the B2B side would be especially appealing.

“We haven’t prioritised size, but it’s obviously clear that we would rather do larger than smaller, because smaller opportunities still take up a lot of time,” he said. “But I’m not talking about transformational, it’s more bolt-on. We’re looking more at the technology and B2B related assets.”

Dot.com to dot.country

In addition, the Kindred CEO took questions about the major European markets in which Kindred’s dot.com brand does business: Norway and Finland. He said he was “convinced” that both would eventually introduce local regulations.

“Both Norway and Finland are on their way to a re-regulation; we’re convinced of that,” he said “They’re both at different stages of development. We believe Finland is ahead of Norway. We heard only a couple of weeks ago that the Finnish monopoly is in favour of a local re-regulation, and that’s very similar to what happened in Denmark in 2010 ahead of re-regulation in 2012. 

“So that’s a positive step in Finland, but it’s still nothing concrete yet. It normally takes at least two years between a country actually deciding something and implementing it. 

However, he added that the impact of re-regulation would not be felt on Kindred’s earnings projections for 2025, which it published ahead of the investor day.

“So when we’re talking about this three-year period, we probably won’t see the impact then, but we think it will come,” he said. “And Norway is probably about five to 10 years away, given our experience and looking at the tonality to discussion in the market, but it’s also trending in that direction.”

In-house platform

Kindred executives also addressed the operator’s efforts to move its sportsbook operations onto a platform developed in-house. Group head of trading Ben Colley said that he expects the launch to be at the end of next year.

“We expect to have a launch by the end of 2023,” he said.

Colley added that the business was making good progress on the development of its platform, which he said made the business more confident in its decision to migrate.

“Clearly we knew we had the in-house expertise to deliver this before we even started because we had developed the racing engine,” he said. “It’s quite a big deal that so many elements of that betting engine were so advanced in what they could do processing mainstream sports. So from our point of view we were ahead of the curve.
“We’ve seen nothing since we started the (Kindred sportsbook platform) process 20 months ago to think we’ve made the wrong decision.”

Kindred will move onto its own product from a sportsbook provided by Kambi, which was once a subsidiary of Kindred before being spun off in 2014.

Kindred chief product officer Erik Backlund addressed that spin-off, and the fact that eight years later Kindred determined it wished to control its own sportsbook product again. He said that this decision did not mean the business regretted the earlier spin-off, as a lot had changed over that period.

“I think that since we took that decision, a lot of things changed,” he said. “Kindred is not the company today that we were back then. That decision was good for us then, it was a key contributor to our growth and let us excel in the ways that we have. 

“Now, the realities are different. It has been strategically important for us to have that control in-house.”

Shareholder pressure

The investor day comes amid pressure from a major shareholder for Kindred to be sold. In August, activist investor Corvex Management – which has pushed the board of Kindred to pursue a sale – became the largest shareholder of the operator. Upon announcing this, it asked to be involved in the nomination of its next board of directors.

In July, sources told iGB that representatives of the Kindred board had reached out to certain operators and private equity groups about a sale, but that there had been no serious interest, with some prospective buyers expressing hesitancy over how the business had adapted to the increasing prevalence of locally regulated markets.

IG Group purchased the brokerage and investor education platform in June of last year, with this acquisition leading to a rise in revenue from high-potential markets around the world.

Total revenue for the three months to 31 August 2022 was £241.8m (€279.5m/$278.4m), up from £218.3m last year. IG Group noted the comparable figure from FY22 excluded £5.8m of foreign exchange hedging gain associated with the financing of the Tastytrade deal.

Of this total, £197.8m came from over-the-counter derivatives, up 5.1% year-on-year, while exchange trade derivatives revenue also climbed 38.3%. Interest income reached £7.1m, compared to a £200,000 loss last year, though stock trading and investment revenue fell 19.7% to £6.1m.

Revenue from core markets accounted for £200.3m of total revenue in the quarter, up 4.5% on last year. IG Group said this was particularly helped by growth in Japan, where revenue was 24.0% higher year-on-year, while it also reported higher revenue in the UK, Australia and emerging markets.

In terms of high potential markets, the addition of Tastytrade led to a 56.0% rise in revenue from £26.6m to £41.5m. Tastytrade was 62% higher, while IG Group also noted strong growth rates across its Spectrum and IG US businesses during Q1.

Total active clients across all markets and products stood at 279,300 which was in line with the previous year’s figure of 279,100, which the business said reflected the retention of the significantly increased number of active clients over the past two years.

In addition, IG Group onboarded 19,200 new clients in the period, down 26.7% from 26,200 last year. The business said this decline was anticipated and that the quality of new clients remained consistent with those onboarded in previous quarters.

The trading update comes after IG Group in July revealed its profits hit new heights during the financial year ended 31 May 2022. The results came alongside the announcement of a new shareholder distribution policy that included £150.0m in share buybacks.

As of 13 September, approximately 3.7 million shares had been re-purchased, at a cost of £30.2m. The programme is expected to be substantially completed before the end of FY23.

IG Group’s next market announcement will be the half year FY23 results, which are due to be released in January 2023.

Corcoran officially began his new role on 13 September and will now lead the group, which operates across the Central Eastern European region within the Czech Republic, Slovakia, Poland, Romania and Croatia. 

He replaces David Vaněk, who had been serving as interim CEO since Per Widerström left the business in March. 

Corcoran joins Fortuna after just under four years as CEO of Paddy Power’s online division, while he also spent the past four years as a director of investment business IFP Investments.

Prior to his time with Paddy Power, he was fund manager for Ireland Smart Tech Fund and also had a spell as CEO of software-as-a-service company xSellco.

Earlier in his career, Corcoran was CEO of Antigua and the North Eastern Caribbean at global mobile phone network Digicel, prior to which he was CEO for the business in Vanuatu and the Cayman Islands.

Corcoran also spent time working as a deployment manager contractor for Nokia and implementation manager at Norconsult. 

“Firstly, a massive thank you to everyone for the warm welcome but particularly to David for his extensive help getting up to speed with the business,” Corcoran said. “I have really enjoyed listening and learning about the FEG business over the last few weeks.

“I am truly excited about working in such an opportunity rich environment.”